More first and second-tier cities on the mainland have been back to two wheels from four, as clogged roads and the jostle for a parking lot have forced people to leave their cars in the garage and cycle their way to work.
Pavements and pedestrian paths north of the border are now jammed with rent-to-ride bikes. There are no less than 30 bike-sharing start-ups nationwide.
Seamless mobile registration and payment, ultra-low rent — less than one yuan (US$0.15) per hour — and the ubiquitous presence of a ride anywhere, anytime have ensured a head start for these bike-sharing firms. Having gained traction in Beijing and Shanghai, they are keen to penetrate more urban centers.
Mobike and ofo, with their duopoly of almost 90 percent of the entire market, have both recently struck new deals of series D financing — US$325 million and UD$580 million, respectively.
The neon orange-colored Mobike and the yellow ofo bikes are in a headlong rush to descend upon streets of lower-tier cities and even towns.
In March alone, ofo wheeled out over a million new bikes, mainly in the suburbs of Beijing, Shanghai, Guangzhou and Shenzhen as well as in central and western cities. The corresponding figure for Mobike was 800,000.
Making sure there’s always a bike nearby is key to consolidating user base. The two firms have been assembling bikes themselves, with an expected combined output of 20 million this year, as producers cannot churn out enough to keep pace with such frenzied expansions. To put things in perspective, China sold 25 million bikes each year prior to the bike-sharing bandwagon.
Users’ deposit — 99 yuan for ofo and 229 yuan for Mobike — means a considerable liquidity pool to fund production of new bikes and operations and maintenance. Deposit is returned only when an account is terminated, meaning a windfall of other people’s money that comes with little cost, and, firms can pump the money for their stock or realty investments, which in turn can be their real pillars of profit.
Observers say peer economy operators like bike-sharing firms should find ways to monetize the big data that they collect from users, a live database that can make real fortunes.
For instance, ofo has started offering tailor-made solutions to retailers using big data to visualize movement and consumption patterns at different hours of the day and during weekends and public holidays in 30 cities across the nation. It can monitor where bike renters go during weekday lunchtime or weekend evenings.
The company also has a membership program that allows loyal riders to redeem their ofo “miles” at designated shops for gifts or discounts.
The seemingly low threshold and lucrative model are no guarantee of a safe ride, though, as the wheels may come off the booming bike-sharing business. Investing in shares and property speculation can be a high-wire act as bike-sharing firms have to make sure their own business can keep going when white hot competition among peers is eating up a big chunk of the profit.
It has also been reported that companies have to foot higher repair and loss costs in smaller cities where some users simply rent bikes and never return them. In other cases, QR codes on bikes are frequently tampered with or destroyed by scammers or competitors.
Latecomers and smaller, cash-strapped firms are unlikely to challenge the duopoly of Mobike and ofo and the market has already seen some operators wind up their business. There will only be two to three competitors left on a tougher terrain where they will have to compete on innovation and the ability to hold onto their users.
Not all mainland cities are suitable for cycling, either due to narrower pavements or steep landforms even in urban areas.
That’s why Mobike and ofo have both ventured into overseas territory with joint ventures in Singapore, the United Kingdom and the United States.
Before long, Hong Kong will also see more disruption to its somehow stagnant bike-sharing market where currently there is only one service provider, GoBee.Bike.
The company was greeted by a bumpy start since its April launch, with several of its bikes found to have been damaged, or even thrown into the Shing Mun River in Sha Tin, triggering a police probe of the sabotage. And traditional bike rental shop owners slam GoBee.Bike for using public resources to benefit its business.
The company at present has about 1,000 bikes for rent, mainly in Tai Po, Sha Tin, Ma On Shan and other parts of the New Territories.
This article appeared in the Hong Kong Economic Journal on Apr 24.
Translation by Frank Chen with additional reporting
[Chinese version 中文版]
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Hong Kong’s first bike-sharing platform sees bumpy ride